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Will China “ease up” with Australia to mitigate its coal crunch?

China is suffering from blackouts, leaving analysts anticipating the return of Australian coal

Light is badly needed in China since power plants are crippled. At the end of the tunnel would be possible resumption of Australian coal imports, provided the republic gets its priorities right.

Not tolerating a dark winter
China’s climate-based initiatives had most of the world holding its breath, at least till carbon-free power generation is tested and proven. It is currently grappling with steel shortage which resulted in a construction crisis after pausing iron ore trade with Australia. The next commodity to suffer the same predicament was coal, which is vital in generating electricity. Coal prices have since skyrocketed and forced many manufacturers to halt operations. Both issues share a common denominator – how can the world go carbon-free?

While this is another topic for the world to mull over the next few years, China now faces a possible dark winter. If the republic remains adamant in not importing coal from Australia, it does not have much options now. Both India and Indonesia are suffering from supply shortages, the rest of the producers are cashing in by charging premiums.

China has reportedly reopened some mines to boost domestic production given Asia’s seaborne thermal coal prices went north. Argus (coal analyst) reported the benchmark price for Australian high-grade thermal coal at Newcastle Port, jumped to US$229.11 a tonne as at 8 October 2021, a 12.5 per cent increase from the prior week’s close. Despite these efforts, industry observers are concerned it might not be sufficient to meet the demand.

Analysts just revealed that the China government called for “appropriate” raising of coal imports to levels on par with 2020. This came after a sharp (imports) dive to almost 10 per cent as at August since beginning of 2021. It has even released Australian coal from bonded storage despite nearly a year-long unofficial import ban, and utilities have tapped rare supply sources such as Kazakhstan and the United States. It is clear Australian coal is back. However, trade relations will be on thinner ice, subject to both parties’ actions moving forward.

 

Marine Online News Team
Please email us at marketing@marineonline.com to contact the author for this article.

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